Market Trends of UK Co-Working Office Spaces Industry
Demand of Co-working Office Space in London Driving the Market
Demand for co-working spaces in London is high and continues to grow. According to industry sources, the UK flex market grew by 22% in 2022, with London seeing strong demand in areas such as Southwark and the financial district.
London is home to over 1,300 co-working spaces, making it the city with the most coworking spaces in the world. The average cost of a coworking space in London is around EUR 400 (USD 431) per month. Coworking spaces in London are popular with a wide range of businesses, including start-ups, freelancers, small businesses, and large corporations. WeWork, the world's largest coworking space company, is set to open a new space in One POultry, a postmodern icon in the heart of London's City district. The open space is expected to open in early 2024 and will offer flexible workspace options for businesses of all sizes.
In a post-pandemic war for talent, firms demand excellent offices, with Grade A space accounting for 90% of take-up in London. The volume of new development coming through will be suited to this quest for best-in-class, and rents on prime space will continue to rise due to competitive tensions between enterprises.
According to the vast majority of UK real estate professionals surveyed in 2022, offering flexible workspaces as part of office real estate is overall positive. According to 25 percent, flex space is important or very important, while 32 percent said it is nice to have. Flexible office space refers to office space that allows short-term leases to individuals, freelancers, small and medium enterprises, and other professionals. In contrast to traditional offices, flexible offices provide equipped and serviced office premises without long-term rent commitment. The majority of office real estate professionals also shared that demand for more flexible leasing will likely increase in the future.
Pandemic Boosting Demand for Co-Working Space
Flexibility is essential in times of uncertainty. In fact, 47% of UK businesses stated they expected their real estate strategies to incorporate more flexible, serviced, or coworking spaces in the future. The attractiveness of being able to walk into a fully functional office, the flexibility to reduce and enlarge space based on headcount, budget properly with an all-inclusive fee, and stay flexible with a monthly rolling contract was magnified by global uncertainty.
In fact, Covid-19 amplified market tendencies that were already evident. Prior to the lockout, there was an increase in demand for flexible office space, and it wasn't just from startups and high-growth companies. Even larger, more established companies began to take a 'core and flex' strategy to real estate, with serviced and coworking providers handling the flex. Flexible office solutions will become increasingly appealing as businesses discover the perfect balance and blend of office space – which will take time – allowing firms to modify their requirements as their strategy evolves.
In 2022, 46 percent of surveyed office landlords, fund/asset managers, REITs, and private owners in the United Kingdom (UK) were open to the idea of receiving rent from flexible workspace operators based on their profit or revenue. Flexible office space refers to office space that allows short-term leases to individuals, freelancers, small and medium enterprises, and other professionals. In contrast to traditional offices, flexible offices provide equipped and serviced office premises without long-term rent commitment. Half of the respondents also shared that they would be comfortable with letting between 10 and 25 percent of a building as flex space.
Since many tech enterprises require more than just office space, London and Manchester, as the UK's top innovation centers, are projected to witness a surge in flexible co-working spaces. Many people are looking for features and local amenities that will help foster innovation and creativity while also improving employees' working lives.
